Sunday, May 11, 2014

Proposed Update to the JOBS Act

According to Financial Services Committee Staff, Congressman Patrick McHenry has offered to "strike Title III of the JOBS Act, which was added by the Senate, and replace it with legislation that closely mirrors the House-passed crowdfunding title and makes additional improvements."

The proposed legislation, "entitled the 'Startup Capital Modernization Act of 2014', (H. R. 4565) is primarily directed towards fixing some of the potentially fatal defects and ambiguities embedded in the original JOBS Act bill...here are some of the highlights:

Raises crowdfunding limits from $1 million to up to $5 million.

Allows self –certified financials for raises under $500,000 – and independently reviewed financials statements for raises between $500,000 and $3 million – leaving the more onerous audited financials for raises above $3 million.

Eliminates the requirement that the SEC promulgate rules requiring detailed, registration statement-like non-financial disclosure resembling a public company report.

Eliminates the need for ongoing annual reporting in perpetuity.

Allows non-broker-dealer intermediaries (funding portals) to register only with the SEC, avoiding registration with FINRA and compliance with its rules.

Allows intermediaries which are not licensed broker-dealers to “curate” crowdfunded transactions, screening out those not deemed suitable for their portal.

Removes the more onerous liability provisions for intermediaries and issuers."

While the bill "has a 5% chance" of being enacted, it is important to note current legislative thinking on the matter.